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CS Professional · IFSCA - Regulations, Listing and Compliances · International Financial Services Centres: An Introduction

Meera Capital, a unit in GIFT IFSC, wants to know whether its plan to sell foreign currency forward contracts is dealing in a 'financial product'. Under the IFSCA Act, 2019, which contract falls outside the definition of foreign currency contracts that count as financial products?

A contract to exchange one currency for another that is to be settled immediately is excluded. The Act counts foreign currency contracts as financial products only if they are not immediate-settlement exchanges, so deferred contracts, deposits and insurance contracts remain covered.

  1. AA contract to exchange one currency for another that is to be settled immediatelyCorrect
  2. BA contract to exchange one currency for another to be settled after ninety days
  3. CA deposit denominated in foreign currency
  4. DA contract of insurance payable in foreign currency

Explanation

Financial products include foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately. A spot-type immediate settlement is therefore excluded. A contract settled after ninety days is covered, and deposits and insurance contracts are separate product categories.

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